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RBA announces surprising interest rate decision

The Reserve Bank of Australia has announced the result of its monthly board meeting.

The official cash rate has been reduced to a record-low 1.75 per cent to the surprise of most experts.

All 34 economists and commentators surveyed by comparison website finder.com.au had expected the Reserve Bank to leave rates on hold.

The consensus view was that it was too soon for the board to move again on rates after making cuts in February and May.

The feeling was that the board wanted several months to assess the impact of the earlier decisions.

Attention will now turn to whether the Reserve Bank could possibly make a fourth rate cut in 2015.

Low inflation and the high Australian dollar are reasons why that might happen.

However, one reason not to do so would be to avoid further inflating property prices in Sydney and Melbourne.

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BT Financial Group chief economist Chris Caton felt before today’s announcement that the Reserve Bank had almost taken Australia to the bottom of the rates cycle.

“It may still cut again, but it will wait to see what's happening to growth, unemployment and investor behaviour in residential property,” he told finder.com.au.

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